CHINA INFLATION: Getting Worse And Coming To A Walmart & Apple Store Near You

On Tuesday Feb. 15, China reported its consumer prices (CPI) rose 4.9% year-over-year (yoy) in January, which came in less than expected. Economists were expecting 5.4% inflation, based on a Bloomberg survey.

However, after digesting the data, Asian markets closed mixed on that news, with China’s Shanghai Composite staying flat after a choppy trading session.

Well, the reason why markets reacted that way is because the lower figure is partly the beneficiary of a previously announced change–effective January 2011–in the weight of items included the CPI basket calculation.

Index Calculation Change

Food previously accounted for a third of the index calculation and was the main driver of inflation last year. According to Bloomberg, National Statistics Bureau (NSB) said that a reweighting of the CPI, including cutting the contribution from food, boosted the headline rate by 0.024%.